Domestic Systemically Important Banks (D-SIBs) are banks whose failure can create serious problems for the banking system and the wider economy. Because of their large size, interconnectedness and important role in the financial system, they are often described as “Too Big To Fail (TBTF)”.
The Reserve Bank of India (RBI) identifies such banks and requires them to maintain additional capital so that they are better prepared to absorb financial shocks.
D-SIBs in India: 2025
The RBI’s 2025 list includes:
- State Bank of India (SBI)
- HDFC Bank
- ICICI Bank
Their additional Common Equity Tier 1 (CET1) requirements are based on their level of systemic importance.
| Bank | Additional CET1 Requirement |
| SBI | 0.80% of RWAs |
| HDFC Bank | 0.40% of RWAs |
| ICICI Bank | 0.20% of RWAs |
Note: This additional CET1 requirement is over and above the Capital Conservation Buffer (CCB).
Why are D-SIBs Identified?
Prevent Systemic Risk: The failure of a major bank can affect other banks and financial institutions because of their interconnected operations.
Strengthen Large Banks: Additional capital gives systemically important banks a stronger cushion against unexpected losses.
Protect Financial Stability: Stronger large banks reduce the risk of financial problems spreading across the economy.
Maintain Public Confidence: Effective regulation helps maintain confidence among depositors, investors and other financial institutions.
RBI’s D-SIB Framework
The RBI introduced the D-SIB Framework in 2014.
Under this framework:
- RBI identifies banks that are systemically important.
- The names of designated D-SIBs are publicly disclosed.
- Banks are placed in different buckets according to their Systemic Importance Scores (SISs).
- Banks with greater systemic importance are placed in higher buckets.
- A higher additional CET1 requirement is imposed on banks placed in higher buckets.
What is Systemic Importance Score (SIS)?
Systemic Importance Score (SIS) is used to assess how important a bank is to the financial system. The assessment considers factors such as its size, interconnectedness, substitutability and complexity.
D-SIBs and Foreign G-SIBs
A foreign bank operating in India through branches may also be subject to additional capital requirements if it is classified as a Global Systemically Important Bank (G-SIB).
In such cases, the applicable additional CET1 requirement is applied in relation to the bank’s Risk-Weighted Assets (RWAs) in India, as prescribed under the RBI framework.
Why is the D-SIB Framework Important?
Financial Stability: It ensures that large and systemically important banks maintain stronger capital buffers.
Risk Mitigation: It reduces the possibility of problems in one major bank spreading to the wider financial system.
Greater Resilience: Additional capital helps banks absorb losses during periods of financial stress.
Stronger Supervision: Systemically important banks receive greater regulatory attention because their failure could have wider consequences.
D-SIB vs Ordinary Bank
| D-SIB | Ordinary Bank |
| Failure can have a significant impact on the financial system. | Failure generally has a more limited systemic impact. |
| Specifically identified by RBI. | Not designated as systemically important. |
| Required to maintain additional CET1 capital. | Does not face the D-SIB-specific capital surcharge. |
| Subject to enhanced regulatory attention. | Subject to normal prudential supervision. |
Conclusion
The D-SIB framework strengthens India’s financial stability system by identifying banks whose failure could have economy-wide consequences. By requiring these banks to maintain additional capital and remain under closer supervision, the RBI seeks to make the banking system more resilient and reduce the risk of a major financial disruption.
FAQs
What is a D-SIB?
A Domestic Systemically Important Bank is a bank whose failure could significantly affect the country’s financial system and economy.
Why are D-SIBs called “Too Big To Fail”?
They are called “Too Big To Fail” because their size and interconnectedness mean that their failure could create wider financial instability.
Who identifies D-SIBs in India?
The Reserve Bank of India (RBI) identifies D-SIBs.
When was the D-SIB framework introduced?
The RBI introduced the D-SIB Framework in 2014.
Which banks are D-SIBs in India in 2025?
The 2025 list includes SBI, HDFC Bank and ICICI Bank.
What is CET1?
Common Equity Tier 1 (CET1) is a high-quality form of bank capital that provides a cushion against losses.
Why do D-SIBs need additional CET1?
Additional CET1 helps D-SIBs absorb losses and remain financially resilient, reducing the risk of their problems affecting the wider economy.
What is the Systemic Importance Score?
Systemic Importance Score (SIS) is used by the RBI to assess a bank’s systemic importance and determine its appropriate D-SIB bucket.
Ravi Raaz
Hassan Khan
Shadab Ali